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ItfAU 


^Foreign  Exchange 

and 

foreign  Business  Outlook 


Address  by 

ALLEN  WALKER 
Manager  Foreign  Trade  Department 
Guaranty  Trust  Co.  of  New  York 

THE  UBRflHt  OF  !Ht 
AUG  2  9  1924 

UNIVERSITY  o*  ILLINOIS 


Distributed  by 

Illinois  Manufacturers’  Association 
76  West  Monroe  St. 
Chicago 


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LUNCHEON 

of  the 

Illinois  Manufacturers  Association 

Louis  XVI  Room, 

Sherman  Hotel,  Chicago,  Illinois, 
Tuesday,  February  24,  1920. 

Speaker:  Mr.  Allen  Walker,  New  York  City. 

Subject:  Foreign  Exchange  and  Foreign 
Business  Outlook. 

Mr.  William  Nelson  Pelouze  presided. 


President  Pelouze:  Members  of  the  Il¬ 
linois  Manufacturers  Association :  There  is  per¬ 
haps  no  subject  that  is  attracting  the  attention 
of  the  financial  world  today  more  than  that  of 
foreign  exchange.  Our  foreign  export  has  be¬ 
come  mightily  affected  by  the  existing  abnormal 
ratio  of  that  exchange.  They  have  both  at  the 
present  time  become  inseparably  interwoven  to 
the  extent  that  one  has  a  large  influence  upon 
the  other. 

Our  distinguished  guest  today,  because  of  his 
prominent  connection  with  what  is  known  to  be 
the  largest  international  institution  of  its  kind  in 
the  world,  has  had  every  facility  and  opportunity 
to  study  these  great  questions.  He  has  kindly 
consented  to  address  our  members  today  on 
foreign  exchange  and  on  the  foreign  business 
outlook. 

It  is  with  very  great  pleasure  that  I  present  to 
you  Mr.  Allen  Walker,  of  the  Guaranty  Trust 
Co.  of  New  York. 

Mr.  Allen  Walker :  Mr.  Chairman  and  gentle¬ 
men  :  It  is  a  very  great  pleasure  to  have  the  op¬ 
portunity  to  come  and  meet  with  business  men 
oi  your  activities  and  your  standing  in  the  mid¬ 
die  west,  and  it  is  particularly  pleasurable  just 
now  to  get  awav  from  New  York,  which  has  had 
much  more  snow  than  you  have,  and  is  rather 
impossible  to  get  around  in.  I  cannot  give  you 
a  better  example — •  to  indicate  what  condition  we 
have  been  in  down  there — of  the  difficulties  of 
transportation  and  traffic  than  to  relate  a  little 
incident  which  happened  in  regard  to  our  own 
institution  the  other  day.  A  small  boy  called  up 
one  of  the  managers  during  the  big  storm  there 


4 


and  said,  ‘.‘Say,  Boss,  1  won’t  be  down  today,  if 
you  don’t  mind;  I  haven’t  yet  got  home  yester¬ 
day  !” 

The  state  of  the  boy  and  the  boy’s  mind  is 
not  unlike  the  whole  international  credit  situa¬ 
tion  at  the  moment.  It  has  not  found  its  bear¬ 
ings.  And  businessmen  everywhere  are  saying : 
“What  is  going  to  happen?  What  underlies  the 
present  exchange  situation?  What  are  the  fac¬ 
tors  tor  which  we  must  watch  in  order  to  be  able 
to  base  our  activities  and  our  business  judgments 
upon  those  tangible  things  which  shall  guide  11s 
in  laying  out  our  business,  programs  for  the 
ensuing  year  or  two?” 

The  whole  credit  and  domestic  business  sit-' 
nation  is  so  closely  interwoven  with  that  of  the 
foreign  situation,  that  it  might  be  serviceable  if 
I  dwelt  for  a  moment  in  the  general  business 
situation  here,  and  what  is  likely  to  happen.  I 
have  said  that  the  country  never  has  been  so  busy 
and  prosperous  in  all  its  history  as  at  the  present 
time.  Despite  the  decreased  purchasing  power 
of  Europe,  and  the  unprecedentedly  adverse  ex- 
-  change  rate,  we  have  piled  up  a  colossal  trade 
balance  in  our  favor  of  $4,000,000,000  in  a  single 
year — 1919.  This  has  been,  of  course,  a  tremen¬ 
dously  potent  factor  in  keeping  our  industrial 
fields  operating  continuously  and  profitably.  It 
has  involved  an  unparalleled  call  for  capital  and 
a  demand  for  credit  that  has  broken  all  records. 

Few  of  us  have  stopped  to  realize  the  problems 
which  our  very  prosperity  has  been  creating  for 
us.  With  continued  high  prices  and  the  conse¬ 
quent  need  for  more  capital  with  which  to  trans¬ 
act  business  of  every  character,  we  are  now 
called  upon  to  answer  the  question  as  to  whether 
or  not  there  is  going  to  be  money  enough  to 
finance  the  great  volume  of  trade  at  prevailing 
prices.  We  are  reaching  the  limit  of  our  na¬ 
tional  credit  resources,  and  the  financial  author¬ 
ities  have  seen  the  need  for  quick  and  effective 
conservation.  The  business  men  of  the  country 
— our  customers  among  the  rest —  must  help  re¬ 
medy  the  serious  situation  for  their  own  protec¬ 
tion  and  for  their  own  profit.  None  of  us  with 
any  of  our  agencies  can  do  it  alone.  It  is  a 
question  of  team  work  and  co-oneration  between 
business  men  and  financiers. 

There  is  an  unprecedented  demand  for  money  ; 
there  is  only  a  limited  supply.  That  supply  must 
be  used  wisely  to  create  new  wealth  and  to  pro- 

4 


mote  productivity.  It  cannot  be  dissipated,  or 
even  partly  wasted  in  speculative,  unproductive, 
or  unessential  business  ventures,  enterprises. 
From  now  on  the  bankers  of  the  country  must 
apply  a  very  strict  gauge  in  granting  credits. 
They  must.  It  will  be  to  the  ultimate  advantage 
of  business  interests  generally  to  co-operate  fully 
with  the  bankers  in  maintaining  this  standard. 
Unless  this  co-operation  is  forthcoming,  we  must 
all  be  prepared  to  face  greater  credit  inflation, 
still  higher  prices,  and  eventually  a  crisis  which 
may  precipitate  a  reaction  with  its  attendant  evils. 

This  does*  not  imply  that  there  is  likely  to 
be  a  serious  business  recession.  The  result  should 
be  quite  the  contrary  if  our  national  business  af¬ 
fairs  are  wisely  conducted.  We  cannot,  how¬ 
ever,  too  strongly  emphasize  the  imperative  need 
for  the  conservation  of  credit  resources,  for  con- 
v  centration  upon  increased  production  of  essen¬ 
tials,  for  government  and  individual  economy, 
and  for  thrift. 

There  is  no  need  for  legitimate,  essential  busi¬ 
ness  to  retrench.  On  the  contrary,  there  is  every 
reason  why  it  should  expand  to  meet  the  neces¬ 
sary  economic  demands, — I  mean  legitimate,  es¬ 
sential  business.  But  business  cannot  do  that, 
however,  if  unessential  enterprises  are  permitted 
to  drain  the  reservoir  of  credit  and  capital. 

The  recent  action  of  the  Federal  Reserve 
Board  in  raising  discount  rates,  ranging  from 
five  per  cent  for  bankers’  acceptances  to  six  per 
cent  for  commercial  paper,  is  the  most  important 
attempt  yet  made  by  that  Board  to  bring  about  a 
contraction  of  credit.  The  liquidation  of  un¬ 
necessary  loans,  which  would  result  from  this 
action,  ought  to  bring  about  a  steadily  increasing 
supply  of  funds  for  more  vital  needs.  A  gradual 
restoration  of  normal  conditions  should  ensue. 
Accommodation  for  strictly  legitimate  business 
requirements  should  not  be  denied  nor  even  cur¬ 
tailed  by  the  bankers.  There  ought  to  be  more 
money  available  than  ‘at  present  for  such  pur¬ 
poses. 

There  must  be,  however,  a  definite  discourage¬ 
ment  of  unnecessary  borrowings,  because  the 
margin  between  the  former  Federal  Reserve  dis¬ 
count  rate  of  4%  per  cent  and  the  market  rate 
of  6  per  cent  no  longer  exists.  When  borrowers 
seek  new  loans  they  must  expect  strict  examina¬ 
tion  as  to  what  the  money  is  wanted  for.  Doubt- 

5 


less,  recognizing  the  conditions,  they  will  help  in 
the  necessary  analysis. 

It  has  been  predicted  that  the  raising  of  the 
discount  rates  by  the  Federal  Reserve  Board 
may  mean  the  beginning  of  a  “break  in  com¬ 
modity  prices.”  It  does  not  seem  likely,  how¬ 
ever,  that  there  will  be  any  precipitate  drop  in 
prices.  AY  hatever  decline  in  commodity  prices 
may  be  effected  will  be  due  to  the  influence 
which  the  higher  rates  may  have  in  diverting 
money  and  credit  from  non-productive  ventures 
into  productive  enterprises,  and  thereby  increas¬ 
ing  the  volume  of  necessary  commodities. 

It  probably  will  take  some  years  before  the 
world  production  can  again  become  normal. 
Europe  has  only  55  per  cent  of  its  food  require¬ 
ments  today.  This  means,  of  course,  greatly  de¬ 
creased  production  of  all  materials  over  there, 
as  well  as  intense  sufferings,  for  factories  can 
not  operate  and  dwellings  cannot  be  heated  with¬ 
out  fuel. 

Europe  must  have  these  necessities,  and  since 
the  law  of  supply  and  demand  is  constantly 
operative,  there  is  seemingly  little  prospect  of 
materially  reduced  prices  for  the  immediate 
future  of  what  we  call  “necessities.” 

From  both  European  and  our  own  enterprises 
we  must  expect  heavy  demands  for  capital  goods 
to  replace  those  destroyed  or  worn  out,  and  until 
we  catch  up  with  these  demands  productivity 
must  be  affected.  The  foreign  trade  of  the  world 
needs  more  ships.  Building  operations  have 
lagged  far  below  normal.  Interest  rates  and  the 
declining  bond  market  reflect  the  situation  in  the 
investment  field.  There  is  a  growing  demand 
for  investment  capital  and  a  great  shortage  of 
supply. 

The  cost  of  money  exercises  an  important  in¬ 
fluence  upon  prices,  and  money  costs,  like  com¬ 
modity  costs,  are  determined  by  the  simple  law 
of  supply  and  demand,  which  is  something  that 
many  men  do  not  seem  to  understand,  that  money 
is  a  commodity  just  like  anything  else,  and  that 
the  law  of  supply  and  demand  operates  in  the 
usual  way.  Interest  rates  are  not  fixed  ar¬ 
bitrarily  by  bankers,  but  are  based  upon  the 
value  which  the  public  fixes  upon  money  and 
upon  the  price  at  which  security  issues  will  be 
absorbed.  Price  of  luxuries  may  fall  soon,  but 
prices  of  the  more  necessary  articles  seem  likely 
to  continue  high,  because  the  consumption  of 

6 


the  whole  world  has  increased  so  far  beyond  any 
one’s  pre-war  dreams.  It  is  hoped  that  this  may 
serve  to  bring  about  an  increased  output  of  the 
necessities  of  life,  and  that  is  the  only  real  solu¬ 
tion  of  the  reduced  cost  of  living.  . 

Now  the  question  on  everybody’s  lips  is :  How 
about  this  foreign  exchange  question  ?  And  there 
is  a  very  definite  connection  between  the  foreign 
situation  and  our  domestic  business,  as  I  have 
stated. 

In  spite,  or  rather,  because  of  the  colossal 
trade  balance  referred  to,  the  depreciated  cur¬ 
rencies  of  European  countries  are  militating 
against  us  very  decidedly.  These  countries  now 
are  buying  heavily  from  us  because  they  are  com¬ 
pelled  to  do  so ;  but  they  are  endeavoring  now — 
I  believe  they  are  beginning  rightly — to  restrict 
purchases  to  absolute  necessities.  Even  with  the 
application  of  severe  self-denial,  however,  there 
must  come  a  time  when  they  will  have  reached 
the  limit  of  their  immediate  buying  power  and 
when  they  must  deny  themselves  even  necessities. 

Meantime  the  present  demoralized  exchanges 
are  acting  in  many  countries  as  an  invisible 
tariff  against  American  products.  A  diminish¬ 
ing  demand  abroad  for  our  goods  must  assuredly 
menace  our  prosperity,  because  in  all  our  history 
foreign  trade  has  never  played  so  important  a 
part  as  it  does  today  in  turning  the  wheels  of 
American  industry. 

Considered  alone  from  the  point  of  view  of 
what  is  good  business  for  us,  it  is  imperative  that 
the  United  States  should  do  two  things,  namely, 
take  more  of  Europe’s  goods  in  exchange  for 
American  products,  and  find  a  way  in  which  to 
grant  Europe  adequate  credits  to  finance  the 
purchase  of  raw  materials  and  other  necessities. 
But  at  the  same  time,  endeavor  to  find  no  ar¬ 
tificial  vehicles  for  the  extension  of  credit,  which 
ordinary  business  processes  would  not  demand. 

The  stabilization  of  exchange  is  contingent  up¬ 
on  more  than  trade  balances  and  credit  arrange¬ 
ment,  however.  It  is  dependent,  in  large  measure, 
upon  the  credit  and  currency  conditions  in 
European  countries.  Those  countries  must  de¬ 
flate  and  return  to  the  gold  standard  before  their 
exchange  can  move  steadily  upward.  Moreover, 
if  Euronean  countries  plead  that  credit  should  be 
extended  to  them  upon  a  business  basis,  then 
they  must  expect  lenders  to  discriminate  and 
exercise  all  proper  business  precautions  in  the 

7 


extension  of  credits.  On  our  part,  we  should  not 
hesitate  to  let  it  be  known  that  we  hope  to  see 
those  countries  taking  immediate  steps  to  adopt 
sound  financial  and  taxation  programs  as  the 
primary  means  of  re-establishing  their  economic 
stability. 

You  may  have  noticed  what  Mr.  Hoover  said 
last  night : 

“Our  best  assistance  in  healing  Europe’s  eco¬ 
nomic  wounds  lies  in  the  promise  of  the  great 
processes  of  private  commerce,  not  in  new  loans 
from  our  government.” 

There  is  nothing  mysterious  whatever  about 
the  exchange  situation  when  one  has  clearly  in 
mind  the  controlling  factors.  Eet  us  take  the 
United  States  and  Germany,  for  example,  in 
making  a  comparison  of  credit  standings.  In  the 
United  States  today  we  have  more  than  one- 
third  of  the  world’s  gold  supply,  and  national 
wealth  of  more  than  two  hundred  and  fifty  bil¬ 
lion  dollars,  a  net  national  debt  less  than  twenty- 
five  billions,  and  a  national  budget  of  about  five 
billions.  In  contrast,  Germany  has  a  negligible 
supply  of  gold,  being,  in  fact,  upon  a  paper  basis 
today,  owing  fifty  billions  dollars  in  national  debt 
and  carrying  an  annual  budget  of  eight  billions. 
Need  there  be  any  mystery  as  to  the  reason  for 
the  depreciated  mark,  or  the  appreciated  dollar 
in  exchange  relations  between  the  two  countries  ? 
An  examination  of  the  financial  condition  of 
other  European  countries  will  show  that  a  similar 
disparity  exists  between  them  and  the  United 
States,  in  greater  or  lesser  degree,  and  readily 
accounts  for  the  difference  in  national  credit. 
The  note  circulation  of  France  (the  paper  cur¬ 
rency),  more  than  six  times  its  pre-war  level. 
The  note  circulation  of  Italy  is  over  five  times 
its  pre-war  level.  The  note  circulation  of  Ger¬ 
many  is  about  ten  times  the  pre-war  level.  In 
each  case  the  disparity  between  the  volume  of 
paper  currency  and  the  gold  reserve  is  very  great. 
These  factors  affect  the  exchange  rates,  quite 
apart  from  the  question  of  trade  balances. 

Today,  there  are  more  than  the  usual  number 
of  questions  to  be  answered  by  those  seeking 
credit  on  this  side  of  the  water.  And  because 
there  are  not  satisfactory  answers,  as  we  see 
them,  to  those  questions,  America  cannot  see  her 
way  clear  to  give  the  quick,  ready,  immediate 
kind  of  help  that  Europe  has  been  seeking,  ap¬ 
parently.  As  a  blanket  statement,  it  may  be  said 

8 


that  there  is  no  such  thing  as  normal  credit  in 
Europe  today.  When  we  think  of  extending 
commercial  credits  to  Europe  at  this  time,  we 
not  only  have  in  mind  the  ascertainment  of  reg¬ 
ular  credit  information;  we  want  also  to  feel  as¬ 
sured  as  to  the  political  stability,  the  existing 
social  order,  the  prevailing  respect  for  the  rights 
of  property — because  property,  after  all,  in  one 
form  or  another,  is  the  ultimate  security  back  of 
every  credit  granted-*— and  something  as  to  the 
soundness  of  the  reconstruction  program  of  the 
national  government  of  each  nation  we  are  seek¬ 
ing  to  serve. 

There  is  no  artificial  means  by  which  restora¬ 
tion  to  normal  conditions  can  be  compelled  by 
any  sudden  process.  There  isn’t  any  wav  it  can 
be  done.  Nothing  but  the  natural  laws  of  trade 
can  operate  effectively  to  bring  about  the  neces¬ 
sary  readjustment.  Europe  somehow  must  con¬ 
trive  to  produce  more  goods  for  sale  in  this 
market  and  to  get  along  with  fewer  purchases,  and 
American  producers  must  make  up  their  minds 
that  fewer  purchases  fromtEurope  are  going  to 
take  place,  and  that  their  buying  power  being 
more  and  more  restricted,  is  going  to  mean  a 
still  further  recession  of  purchases  on  this  side. 

But  I  would  have  you  manufacturers  remem¬ 
ber  that  Europe  is  not  the  whole  world.  That 
the  buying  power  of  the  rest  of  the  world  is 
greater  than  it  ever  was.  I  have  talked  with 
manufacturers,  producers,  merchants,  who  have 
come  to  my  desk  to  discuss  foreign  transactions 
and  foreign  trade  and  export.  They  have  been 
doing  business  exclusively  with  Europe  for  a 
number  of  years,  and  I  have  sensed  that  they 
seem  to  have  no  other  countries  than  Europe  in 
mind  as  a  possible  field  for  export  of  their  sur¬ 
plus  product,  or  any  other  countries  than  Europe 
as  the  territories  in  which  to  lay  their  plans  for 
future  business. 

Why,  gentlemen,  the  Far  East  today  is 
developing  a  purchasing  power  by  leaps  and 
bounds,  which  nothing  but  a  close  analysis  of  the 
figures  can  make  realizable.  The  Far  East  to¬ 
day,  China  particularly,  offers  a  prolific  market 
for  the  American  producer  in  almost  every  major 
line  of  industry. 

In  South  America  the  dollar  is  at  a  discount,  and 
never  was  there  more  reason  than  today,  never 
was  there  more  good,  sound  business  reason  for 
the  American  producer  to  extend  his  markets  to 
South  America.  And  there  is  opportunitv  galore. 

9 


There  are  three  separate  and  major  obstacles 
to  the  revival  of  European  trade;  a  mal-  adjust¬ 
ment  between  internal  prices  and  international 
prices;  a  lack  of  individual  credit  wherewith 
European  consumers  may  buy  the  raw  materials 
needed  to  secure  the  working  capital  and  to  re¬ 
start  the  circle  of  exchange ;  and  a  disordered 
currency  system  which  renders  credit  operations 
hazardous  or  impossible  quite  apart  from  the 
ordinary  risks  of  commerce. 

Almost  daily  we  are  being  asked  as  to  what 
justification  .there  is,  if  any,  for  statements  ap¬ 
pearing  in  certain  sections  of  the  foreign  press 
to  the  effect  that  the  United  States  is  displaying 
economic  selfishness  and  seeking  to  maintain  the 
dollar  premium  for  her  own  commercial  gain. 
This  kind  of  comment  is  not  intelligent.  Amer¬ 
ica  cannot  help  the  situation,  nor  is  there  any¬ 
thing  she  can  do,  within  the  scope  of  sound, 
legitimate  business,  to  remedy  existing  condi¬ 
tions.  We  all  realize  that  unfavorable  exchange 
rates  make  it  almost  prohibitive  for  us  to  sell 
goods  to  Europe,  Wno,  in  America,  even  from 
a  purely  selfish  point  of  view,  wants  such  a  con¬ 
dition  to  continue  ?  Existing  circumstances 
simply  are  beyond  our  control. 

During  1918  we  imported  from  Europe 
$318,000,000  worth  of  goods,  and  in  1919  we  im¬ 
ported  $750,000,000  worth.  This  proportion  is 
greater  than  the  increase  of  our  exports,  to 
which  the  imports  are  really  due.  In  contrast, 
we  have  been  and  are  exporting  gold  to  Argen¬ 
tine,  with  which  we  have  been  contracting  our 
trade.  That  is  the  exact  reverse  of  the  condition 
across  the  Atlantic.  We  are  selling  to  Europe 
so  much  that  Europe  cannot  pay  for  it.  We  are 
buying  from  Argentine  so  much  that  we  must 
pay  in  gold  in  order  to  maintain  exchange.  The 
two  cases  call  for  opposite  remedies.  If  trade 
with  Europe  should  be  contracted,  certainly  it 
should  be  expanded  with  any  country  which  now 
has  power  to  take  our  gold. 

The  only  way  to  keep  trade  moving  is  by  a 
courageous  policy — not  hesitating  to  do  business 
because  of  a  feeling  that  everything  is  going  to 
the  dogs ;  allowing  credits  discriminate^  on  a 
basis  of  liquidating  debts  of  goods  with  goods. 
Finance  credit  cannot  be  enlarged  and  should  not 
be  contracted  too  suddenly  nor  too  extremely.  I 
have  little  patience  with  those  who  would  seek  to 

10 


bring  about  deflation  over  night,  and  attempt  to 
remedy  things  by  some  sudden  process  arrived 
at  during  a  few  hours’  consultation.  It  is  im¬ 
possible  to  bring  about  sensible  readjustments  in 
any  organization,  international,  national,  or  cor¬ 
porate,  by  any  series  of  violent  jerks.  It  can  be 
done  only  by  a  gradual  strengthening  of  the 
whole  economic  fabric. 

Let  us  refer  to  Canadian  exchange  for  a 
moment.  We  have  been  supplying  Canada  with 
an  enormous  quantity  of  goods,  much  in  excess 
of  the  volume  we  have  been  taking  from  her. 
This  means  that  Canada  has  been  making  a  pre¬ 
ponderant  volume  of  remittances  for  the  goods 
she  has  purchased  from  us  and  that  she  has  been 
bidding  with  the  rest  of  the  world  for  the  Amer¬ 
ican  dollar.  The  volume  of  her  commercial  bills, 
like  any  other  commodity,  with  the  same  law  of 
supply  and  demand  operating,  in  the  Amerian 
market  has,  by  the  application  of  those  laws, 
cheapened  the  price  and  lowered  her  exchange 
rate.  There  is  no  sentiment  in  the  matter  at  all. 
Money  is  a  commodity  like  anything  else  which 
is  bought  and  sold  in  the  public  market. 

It  is  impossible  for  any  one  to  say  when 
foreign  exchange  will  improve,  and  by  what  de¬ 
grees.  Conditions  would  seem  to  indicate  that 
a  normal  situation  can  be  reached  only  by 
gradual  adjustments  over  a  period  of  from  three 
to  five  years — perhaps  longer.  When  some  form 
or  international  peace  is  consummated  by  the 
United  States,  when  European  boundaries  have 
been  permanently  fixed  so  that  the  new  nations 
know  exactly  “where  they  are  at,”  when  they 
have  been  enabled  to  procure  food  and  fuel,  raw 
materials,  and  machinery,  and  seriously  start  all 
their  neople  to  work,  start  their  factories  going 
under  steady  pressure,  and  produce  as  in  pre¬ 
war  days,  then  we  may  all  feel  that  the  world  is 
on  a  sure  road  towards  definite  reconstruction. 
The  general  feeling  of  confidence  created  by  this 
actual  knowledge  will  mean  a  better  business 
sentiment,  easier  money,  easier  credits,  and  a 
saner  world  all  around.  Business  men  will  be 
able  to  watch  and  judge  for  themselves  as  to  how 
these  conditions  are  to  be  arrived  at,  step  by 
step. 

Before  I  conclude,  I  just  want  to  say  a  word 
on  the  subject  of  increased  production,  inter¬ 
national  as  well  as  national,  because  it  is  upon 

11 


that  factor,  above  every  other  factor,  to  my 
mind,  that  solid  reconstruction  depends. 

Increased  production,  in  the  United  States  and 
the  world  over,  is  not  a  problem  confined  to  the 
financier  or  the  economist,  but  is  every  man’s 
problem.  There  never  was  a  time  in  the  history 
of  the  world  when  it  was  such  a  vital  question 
as  it  is  with  us  all  today.  And  when  you  ask 
‘What  are  we  to  do  about  it?’  there  is  only  one 
answer:  ‘Try  and  make  the  gospel  and  the  in¬ 
terpretation  of  it  so  clear  and  so  simple  that 
every  man  whom  you  employ  and  every  man 
who  is  your  neighbor  shall  help  develop  a  pa¬ 
triotism  of  peace  and  insist  that  a  full  day’s  work 
for  a  full  day’s  pay  shall  be  as  much  a  matter  of 
national  pride  as  is  the  individual  pride  in  Old 
Glory  itself.” 

A  great  many  thoughtful  men  have  been  giv¬ 
ing  their  minds  to  the  solution  of  this  problem 
lately.  Every  wage  earner,  every  housewife, 
every  home  builder  is  crying  out  against  ab¬ 
normally  high  prices  for  the  necessities  of  the 
breakfast  table.  There  is  but  one  answer :  In¬ 
crease  production. 

We  are  asked  to  find  means  of  extending 
credit  to  Europe,  in  order  that  lives  may  be  saved 
and  the  wheels  of  industry  there  kept  going. 
There  is  but  one  verdict :  'Increased  production. 

Under  production  is  not  limited  to  local  or 
even  a  national  malady.  It  is  a  world-wide  con¬ 
dition  at  this  moment.  Everywhere  the  demand 
exceeds  the  supply.  There  is  little  fear  of  our 
catching  up  or  of  reaching  any  market  where  the 
supply  may  exceed  the  demand,  for  some  time 
to  come. 

We  cannot  find  money  to  help  reconstruct  the 
world  and  simultaneously  spend  our  earnings  in 
luxuries  which  are  beyond  the  means  of  the 
prudent  and  the  thrifty.  We  cannot  listen  to  the 
demands  for  six-hour  days  and  five-day  weeks 
and  still  hope  to  produce  the  materials  for  our 
own  needs,  let  alone  what  the  world  requires  of 
us.  Neutral  countries  are  sending  raw  materials 
into  Germany  with  a  pledged  lien  on  the  finished 
products,  in  response  to  the  German  request  that 
she  shall  have  the  opportunity  to  employ  her 
people  and  start  her  factories  going. 

It  is  reported,  and  there  seems  to  be  good 
foundation  for  the  report,  that  the  German 
workers  are  pledging  themselves,  through  their 
local  organizations,  to  be  satisfied  with  a  ten 


hour  day,  and  that  in  many  places  they  are  urg¬ 
ing  a  12  and  16  hour  day  until  the  peak  of  re¬ 
construction  be  reached.  I,  for  one,  am  not  an 
advocate  of  any  speeding  up  processes  calculated 
to  be  harmful  to  the  health  and  general  welfare 
of  the  individual,  but  I  would  ask:  If  these  re¬ 
ports  be  true,  if  Germany  does  this — and  let 
there  be  no  misconception  as  to  the  economic 
sense  and  the  industrial  will  of  the  Germans — 
and  in  the  meantime  we,  in  America,  are  content 
to  witness  a  gradual  shortening  of  working  hours 
and  automatically  restrict  our  production  there¬ 
by,  who,  in  the  last  analysis,  will  have  won  the 
war  ? 

There  never  was  a  time  when  the  workers  of 
the  world  may  need  more  money,  and  they  may 
need  better  conditions,  but  the  way  to  get  these 
things  is  not  to  do  poorer  work  and  less  of  it. 
There  never  was  a  time  in  history  when  the 
workers,  from  the  girls  in  the  kitchen  to  skilled 
producers  in  the  factories  produced  so  little  and 
asked  so  much  as  today.  I  am  a  worker  myself, 
and  I  have  never  seen  any  intelligent  hope  of 
getting  a  raise  in  my  salary  by  making  my  out¬ 
put  less  and  punker  than  it  is  now.  I  find  so 
much  to  do  that  I  cannot  find  any  day  long- 
enough. 

In  every  group  of  human  beings  are  to  be 
found  people  who,  like  quack  doctors,  have  an 
overnight  remedy  with  a  new  nostrum  to  be  ap¬ 
plied  for  every  new  sickness.  We  are  having 
quite  a  few  nostrums  presented  to  us  today.  I 
would  that  our  ears  might  be  relieved  from  the 
affliction  of  listening  so  much  to  persons  who 
have  noises  in  their  heads  which  they  mistake 
for  constructive  thought. 

What  the  country  needs  more  than  anything 
else,  gentlemen,  is  an  invasion  of  common  sense. 
Buying  what  you  don’t  need  is  a  pretty  short  and 
sure  road  to  needing  what  you  cannot  buy.  A 
condition  of  half-strike,  half-producing,  a//-con- 
suming  cannot  possibly  endure.  Five  minutes  of 
restraint  from  purchasing  what  you  can  do  with¬ 
out  at  a  time  like  this  is  worth  ten  years  of 
cussing  the  profiteer. 

It  has  been  said  that  there  -has  been  much 
gnashing  of  wisdom  teeth  over  reconstruction 
problems,  but  I  warrant,  not  all  wisdom  teeth. 

During  the  war  universally  we  were  inspired 
to  put  every  ounce  of  energy  into  the  raising  of 
men,  money  and  material,  and  into  organizing 

13 


the  nation  to  go  out  and  destroy  militant  life. 
Now  we  are  called  upon  to  produce  in  order  that 
we  may  lend  money  and  send  the  products  of 
every  man’s  brains  and  arms  to  save  life  and  to 
preserve  civilization.  No  thoughtful  American 
industrialist  that  I  have  met  has  ever  quarreled 
with  high  wages,  high,  let  us  say,  in  comparison 
with  wages  paid  for  similar  work  in  other  parts 
of  the  world.  For  many  years  the  wages  paid 
to  American  railroad  men  have  been  considerably 
higher  than  those  paid  to  railroad  employes  any¬ 
where  on  the  face  of  the  globe,  and  yet  we  have 
been  able  to  carry  a  ton  of  freight  per  mile 
cheaper  than  any  other  country  in  the  world.  It 
is  the  tendency  to  decrease  production  that  the 
patriotic  American  citizen  quarrels  with  to-day. 
However  many  be  the  theories  for  the  solution  of 
*  the  vexing  problems  of  the  hour,  I  hold  that 
there  are  two  maxims  which  if  universally  and 
effectively  applied,  will  solve  most  of  the  dif¬ 
ficulties  both  here  and  in  every  other  part  of  the 
world.  As  I  think  of  the  extent  to  which  foreign 
exchange,  foreign  trade,  domestic  prosperity  and 
all  the  international  problems  are  linked  up  and 
based  on  this  one  great  question,  a  question 
which  may  be  interpreted  in  two  simple  words, 
“save”  and  “produce,”  I  look,  ahead,  gentlemen, 
to  the  part  which  I  hope  America  may  play  in 
the  future,  and  I  say,  “Above  all,  in  God’s  name, 
let  us  produce,  and  stimulate  our  fellows  to  pro¬ 
duce,  in  order  that  we  may  anticipate  the  kind  of 
America  that  we  all  want  America  to  be.  I 
thank  you. 

The  President:  I  know  I  express  the  sen- 
siments  of  all  present  when  I  extend  to  Mr. 
Walker  our  sincere  thanks  for  his  very  able  and 
instructive  address. 


i 

K  ' 


14 


THE  UBHAHt  Of  (B£ 
AUG  2  9  1924 

UNIVERSITY  nc  ILLINOIS 


